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Retail Sector Finally Formed Harmonic Triangle

Kathy Garber

XRT, the ETF for the retail sector, has been in an uptrend with small pullbacks, finally enough of a pullback that is a harmonic requisite for the triangle that begins the harmonic rotation.  Although this retracement from an initiative upside move is shallow, it’s enough to create a so-called confusion in what to do now.  This is evident anytime there are opposing emerging patterns; however, momentum is attempting to lead price to the downside.

3262014XRTD thumb Retail Sector Finally Formed Harmonic Triangle

The day chart shows opposing emerging harmonic patterns with the nearby line in the sand at 88.95. This level has the power to invalidate one of the patterns, as well as the 76.80 level.

Currently price is falling to test GRZ, which can offer some guidance as to the strength of this pullback. A hold above 83.34 implies an attempt to retest 87.39 or 88.95.  Above 88.95 invalidates the cyan-colored pattern and has the ideal upside target at 96.46 and point of interest at 93.59.

A hold below 83.34 has the initial ideal target at 76.80 but points of interest along the way at 80.85 and 79.07.  Points of interest, aka scaling points, are potential rejection levels, so they are to be respected for that possibility.  A breakdown of 76.80 invalidates the brown-colored pattern and focuses on completing the cyan-colored pattern at 62.93.

3262014XRTMTS thumb Retail Sector Finally Formed Harmonic Triangle

The intraday chart shows that price is testing the initial level of a bullish PRZ so offers an opportunity to bounce; however, failure to first push above 84.56 and more important failure to reach or reject 85.35 implies a retest of all levels inside the PRZ with 83.43 as the extreme.  Note this will help get closer to the Day’s GRZ level, 83.34.

If the bullish pattern, in this case called a Butterfly, generates a respectable retracement, and a hold above 83.35 occurs, the ideal target is 87.53 and the gray fibs along the way as scaling points with emphasis at 86.18.

A hold below 83.43 has the extended PRZ target of 82.76 to 82.30. If bulls cannot find enough energy to retrace this extreme pattern, then the bears are celebrating their strength.

There are times that price will coil or stall in a consolidation type formation when in a PRZ. When this occurs and a valid break from this happens, the move can be swift or powerful. It’s likened to the instrument holding its breath during the coiling and exhaling upon the break.